Cisco Aims to Create Reseller Advantage with Clear Advantage

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With the potential for channel conflict, Cisco executives have developed an incentive program that rewards resellers and systems integrators by offering cash rewards that are based on how many products they sell in a given quarter.

Cisco Systems Inc. has developed a new incentive program to encourage its partners to buy its MDS 9000 storage products.

Although incentive programs are common in the storage arena, Cisco, based in San Jose, Calif., faced an additional challenge, since channel partners do not buy products directly from the company. Instead, they must purchase products through an approved list of OSMs (Original Storage Manufacturers) including IBM, EMC Corp., Hewlett-Packard Co., Storage Technology Corp. (StorageTek), Hitachi Data Systems and Xiotech Corp.

That potential channel conflict is what prompted Cisco executives to develop Clear Advantage, an incentive program that rewards resellers and systems integrators offering cash rewards that are based on how many Cisco MDS 9000 products they sell in a given quarter.

"Integrators and VARs are a very important piece of the storage decision, but we didn't have any direct access to them because we use a model where they have to buy from the OSM," said Keith Zubchevich, Cisco's director of storage for worldwide channels. "So we had to figure out a way to create incentives to a VAR partner that doesn't even buy direct from Cisco."

The result was Clear Advantage, a system that translates sales of MDS 9000 products based on point-of-sale information and electronic submission of serial numbers into points, with each point worth $1. Points are derived by taking 5 percent of the average OSM transfer cost.

Although it sounds complicated, Zubchevich says it's a simple matter of the partner entering sales information electronically. The system automatically calculates whether the VAR has met its growth targets and, if it has, calculates the number of rebate points earned.

"It's definitely complicated from an accounting point of view, and you have to take the time to submit the claim forms, but it's worth doing for the rebates," said Chris Lusk, director of open systems and storage at Sirius Computer Solutions Inc., a San Antonio, Texas, reseller specializing in IBM solutions. Lusk said the program compares favorably to McData Corp.'s rebate program, although McData's program, which pays a set fee per transaction, is easier to use.

Although it's worth participating in, Cisco has set an ambitious goal for partners by requiring 20 percent growth each quarter, Lusk said.

"There are a lot of partners that won't be able to sustain that type of growth, and I don't know how many quarters in a row we can sustain that growth rate," he said. Cisco isn't heartless, howeverit allows partners to make up missed targets in the next quarter or at year's end, he noted.

Although it's a bit complex, Zubchevich believes that Clear Advantage is one of the most lucrative storage-related incentive programsmore lucrative than that of Cisco's competitors. "If you look at the totals we are paying out, they are probably more significant than any other incentive program by our competition," he said.

"There is definitely money to be made," Lusk agreed. "We did $5.5 million in Cisco [products] last year, and if we had gotten a 5 percent rebate on that, that would have meant $250,000, which is a significant chunk of revenue."

The program also will reap benefits for OSMs, said Charles Tate, a business development manager at IBM, a Cisco OSM.

"Traditional channel management is left to the OEM, or, in this case, the OSM. Here, the OEM seller (Cisco) and buyer (IBM) are working together to ensure that the channel is focused on the combined solution," he said.

The Clear Advantage program also complements the Cisco OSM Active Go-To-Market strategy, Tate said, because Cisco works with OSMs to promote demand and support solutions creation by and through the channel. "This is in contrast to a technology-only sale where the OEM seller is effectively disengaged from the OEM buyer's efforts to generate demand," he said.

Although Clear Advantage is new, Zubchevich said he hopes the company's goal of incentivizing its VARs will bear fruit.

"If we want them to invest the time in understanding what MDS delivers, they need to get something in return, and Clear Advantage provides that reward," he said.